Expense tracking applications are definitely on the rise, with strong growth through 2022. Still, most employees manually submit expense reports and paper receipts to the account manager. Only after this, the manager tracks the reports using spreadsheets. Either broken or stolen manual reports made up to 68% of all expense fraud cases in the last few years. Thus, in 2021 businesses should be aware of how to detect frauds and prevent them.
Expense account fraud is a growing issue all over the world, especially in the USA, where it was estimated to a loss of $2.8 billion a year. And the actual scale of expense fraud cases is even bigger. The knowledge of how to detect fraud prevents companies from taking valuable capital away from other business priorities.
In this article, we have listed the most common examples of expense fraud and measures to prevent them with the help of expense trackers.
- Types of Expense Fraud Cases and Their Examples
- Avoidance of Expense Fraud Cases with Tracking Software
- Prevention of Expense Account Fraud with Automated Approval
- Detection of Fraud by Keeping Historical Data Safe
- Identity Fraud Expense Coverage
Types of Expense Fraud Cases and Their Examples
Not all expense fraud cases are deliberate: you can always find among them cases from simple typing errors to receipt loss. For business managers or accountants, it’s crucial to be aware of how to detect fraud. Thus we define 3 types of expense frauds:
- The most obvious case is the mischaracterized mistake. It happens when an employee submits individual expenses under the category of company expenses.
- Automatic mistakes also become a common issue. Such a situation occurs where an employee submits the same expanse ticket for an item more than once. However, sometimes desperate employees deliberately create multiple reports.
- You’ll be surprised how some fraudulent programs made it easy to create fake documents. Fictitious expenses are commonly quite hard to detect, as they appear genuine.
Fun fact: Did you know that one of the best-selling books on Amazon claims to teach you a thousand and one ways to inflate costs? For someone, this may sound crazy. Yet, overstated expenses in some cases may also be considered as expense fraud.
Advanced apps and solutions allow businesses to prevent expense account fraud cases by detecting fraudulent activity. Expense Sensei is a newcomer on the market of tracking apps, however, it has already gathered multiple functions from providing clear expense submissions to automated approvals. What’s even more important, the solution provides an A-class security to ensure that user data is not compromised. Check more info about the app and cross the paperless side.
Avoidance of Expense Fraud Cases with Tracking Software
According to the statistics, the middle loss caused by expense fraud is over $30,000, and small companies with less than 50-60 employees have a 28% higher loss than larger corporations. Expense tracking software has product functionality that reduces expense fraud cases and other causes of loss.
After employees make a purchase or pay the bill in the cafe, they can simply take a photo of receipts on the go using their phones.
Prevention of Expense Account Fraud with Automated Approval
One of the ways to avoid expense report fraud punishment with tracking apps is to make everything automated. Automation will completely avoid mechanical or accidental mistakes. With the help of modern expense trackers, companies can accept or decline submissions based on defined values.
Once the rules are set, the expense control program takes over most of the approval process. The accountants, managers, or HRs only need to check the accuracy before filling the accounting program.
Overcoming the conflict in financial processing saves your business money by reducing costly mistakes and making it much more difficult to commit fraud.
Detection of Fraud by Keeping Historical Data Safe
Last but not least app functionality for business expense management is keeping and tracking historical data. This information is important for managers and accountants while budgeting and forecasting. Analyzing historical spending, you’ll figure out what budget amount is necessary moving forward.
Moreover, in case your business includes a lot of business trips and hotel stays, use historical data to contract with a specific hotel and lower living costs.
Identity Fraud Expense Coverage
Identity fraud occurs when a person uses your identity to commit fraud or deceive someone. It happens when a fraudster is using your Social Security number or your personal information to submit an income tax return or get your reimbursements. Nearly 60 million Americans have been affected by identity theft in the past few years.
Unfortunately, it is still difficult and not always possible to prevent identity theft. However, if such a thing has happened to you, the company you work for is obligated to do the identity fraud expense reimbursement coverage.
That’s why the expense tracking application becomes extremely useful in this situation. The app allows accountants to track your expenses flow by specific categories and determine the amount of money you used, to make a reimbursement.
There were several tips and pieces of advice on how to detect frauds and prevent expense submission mistakes. We can also include in this list lack of awareness of expense policies, inappropriate policing of expenses, and a few more situational cases.
Expense account fraud is a vexing problem in business, but it doesn’t have to occur at your company. By using expense tracking apps with a modern approach, you make sure your employees know the rules and won’t take advantage of company expense funds.